Question: If you win a $ 1 , 0 0 0 , 0 0 0 lottery prize you generally have two options to choose from when

If you win a $

1, 000, 000

lottery prize you generally have two options to choose from when you claim your winnings. One is to take twenty annual payments that add up to the $

1, 000, 000

and the other is to take an immediate one time lump sum. In general, how do they calculate the one time lump sum amount? They calculate the present value of each of the twenty annual payments, then add them all up and pay the winner

30 %

of the sum.. They calculate the present value of each of the twenty annual payments and then add them all up

.

They calculate the present value of the first ten annual payments and then add them all up

.

They calculate the future value of each of the twenty annual payments and then add them all up

.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

APPENDIX 9.1 Present value of $1 received in n periods. Periods 4% 9% 10% 11%% 12% 13% 14%% 16% 18% 20% 0.9615 0.9524 0.9434 0.9346 0.9259 0.9174 0.9091 0.9009 0.8929 0.8850 0.8772 0.8621 0.8475...

Chuck has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $134,000 cash payment today. The second option is to receive $21,000 at the end of...

Kevin has just won the Flyball Lottery. He has two options for receiving his prize. The first option is to accept a $125,000 cash payment today. The second option is to receive $24,100 at the end of...

Listed in the accompanying table are sample times (seconds) that animated children's movies showed the use of tobacco. The bootstrap method is planned to be used to construct a 90% confidence...

QUESTION 1 All of the followings are the rights and privileges of a Common Stockholders EXCEPTING: a. Voting/Proxy Rights b. Right to Dividends c. Residual Right d. Pre-emptive Right e. Right to...

Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68...

GROUP 1 Quaternion Definition Group . 3 questions QUESTION 1.1 Quaternion Definition Choose one . 5 points Find the real part and vector part of the quaternion q = [3, 7, 0, 7] O real part a =7 ,...

GROUP 1 V Quaternion Definition Group . 3 questions QUESTION 1.1 Quaternion Definition Choose one . 5 points Find the real part and vector part of the quaternion q = [3, 7, 0, 7] O real part a =7 ,...

Assume you want to retire early at age 52. You plan to save using one of the following two strategies: (1) save $5,100 a year in an IRA beginning when you are 27 and ending when you are 52 (25 years)...

Assume you want to retire early at age 53. You plan to save using one of the following two strategies: (1) save $3,000 a year in an IRA beginning when you are 28 and ending when you are 53 (25 years)...

Is there a violation of the Fair Debt Collection Practices Act (FDCPA) when the collector presumes that the debt is valid unless the alleged debtor disputes it in writing? If so, is ignorance of the...

List the four categories into which classes fall.

13101. The 0.5-kg ball is guided along the vertical circular path r = 2rc cos u using the arm OA. If the arm has an angular velocity u . = 0.4 rad>s and an angular acceleration u $ = 0.8 rad>s2 at...

Pharoah Company reported the following amounts for 2022: Raw materials purchased $95,200 Beginning raw materials inventory 5,824 Ending raw materials inventory 5,040 Beginning finished goods...